U.S. Bureau of Labor Statistics

Average Annual Pay Technical Note

- 4 -
Technical Note
These data are the product of a federal-state cooperative program known
as Covered Employment and Wages, or the ES-202 program. The data are de-
rived from summaries of employment and total pay of workers covered by
unemployment insurance (UI) legislation and provided by State Employment
Security Agencies (SESAs). The summaries are a byproduct of the admini-
stration of state unemployment insurance programs that require most employers
to pay quarterly taxes based on the employment and wages of workers covered
by UI. Data for 2001 are preliminary and subject to revision. The 2000
data used to calculate the 2000-01 changes for individual metropolitan areas
and consolidated metropolitan areas presented in this release were adjusted
for changes in county classification to make them comparable to data for 2001.
As a result, the adjusted 2000 data differ to some extent from the data avail-
able from the BLS Web site.
Coverage
Employment and wage data for workers covered by state UI laws and for
federal civilian workers covered by the Unemployment Compensation for
Federal Employees (UCFE) program are compiled from quarterly contribution
reports submitted to the SESAs by employers. In addition to the quarterly
contribution reports, employers who operate multiple establishments within
a state complete a questionnaire, called the "Multiple Worksite Report,"
which provides detailed information on the location and industry of each of
their establishments. Average annual pay data included in this release are
derived from microdata summaries of 8.0 million employer reports of
employment and wages submitted by states to the Bureau of Labor Statistics.
These reports are based on place of employment rather than place of
residence.
UI and UCFE coverage is broad and basically comparable from state to
state. In 2001, UI and UCFE programs covered workers in 129.7 million
jobs. The estimated 124.8 million workers in these jobs (after adjust-
ment for multiple jobholders) represented 99.7 percent of wage and salary
civilian employment. Multiple jobholder estimates are produced by the
Current Population Survey. Covered workers received $4.695 trillion in
pay, representing 94.8 percent of the wage and salary component of person-
al income and 46.6 percent of the gross domestic product. About 83 percent
of all covered workers were employed in metropolitan areas. Total wages of
workers in metropolitan areas comprised approximately 87 percent of all
covered wages in the United States.
Major exclusions from UI coverage during 2001, are self-employed workers,
most agricultural workers on small farms, all members of the Armed Forces,
elected officials in most states, most employees of railroads, some domestic
workers, most student workers at schools, and employees of certain small non-
profit organizations.
- 5 -
Concepts and methodology
Average annual pay was computed by dividing total annual pay of em-
ployees covered by UI programs by the average monthly number of these em-
ployees. In addition to salaries, average annual pay data include bonuses,
the cash value of meals and lodging when supplied, tips and other gratuities,
and, in some states, employer contributions to certain deferred compensation
plans, such as 401(k) plans and stock options. Monthly employment is based
on the number of workers who worked during or received pay for the pay period
including the 12th of the month. With few exceptions, all employees of co-
vered firms are reported, including production and sales workers, corporation
officials, executives, supervisory personnel, and clerical workers. Workers
on paid vacation and part-time workers are also included. Percent changes in
average annual pay were computed using preliminary North American Industry
Classification System (NAICS)-based 2000 data as the base. These preliminary
NAICS-based 2000 data will differ from the SIC-based 2000 data previously pub-
lished.
Average annual pay is affected by the ratio of full-time to part-time
workers as well as the number of individuals in high-paying and low-paying
occupations. When comparing average annual pay levels among metropolitan
areas, these factors should be taken into consideration. Annual pay
data only approximate annual earnings because an individual may not be
employed by the same employer all year or may work for more than one
employer. Also, year-to-year changes in average annual pay can result
from a change in the proportion of employment in high- and low-wage jobs,
as well as from changes in the level of average annual pay.
In order to insure the highest possible quality of data, SESAs verify
with employers and update, if necessary, the industry, location, and own-
ership classifications of all establishments on a 3-year cycle. Changes
in establishment classification codes resulting from the verification
process are introduced with the data reported for the first quarter of the
year. Changes resulting from improved employer reporting also are intro-
duced in the first quarter. For these reasons, some data, especially at
more detailed geographic levels, may not be strictly comparable with earlier
years.
The combined metropolitan area totals and the consolidated metropoli-
tan areas totals provided in tables 1 and 2, respectively, have not been
adjusted for changes in county classifications or changes in Metropolitan
Statistical Area or Consolidated Metropolitan Statistical Area definitions.
Individual metropolitan areas and consolidated metropolitan areas, however,
have been adjusted for county reclassifications. Historical metropolitan
and nonmetropolitan area data presented in this release have not been ad-
justed for changes in noneconomic county reclassifications or changes in
metropolitan area definitions. Metropolitan area redefinitions can cause
substantial changes in employment and wage data between years. For example,
in 1993, widespread metropolitan area definitions which incorporated the 1990
Census were introduced, resulting in a sharp decline in employment and wages
in nonmetropolitan areas. The all metropolitan area totals increased corre-
spondingly due to these redefinitions. Changes in metropolitan area defini-
tions have a larger impact on over-the-year changes for the all nonmetropo-
litan area totals than the all metropolitan areas. This is because the non-
metropolitan area total is significantly smaller in size than the all metro-
politan area component and is more sensitive to changes in definitions.
- 6 -
The comparison of metropolitan and nonmetropolitan area pay growth in
this release reflects recalculations of historical average annual pay. As
a result, pay growth figures in some years differ from earlier releases.
Previously, average annual pay calculations for the all metropolitan area
total and the nonmetropolitan area total may have included adjustments for
changes in Metropolitan Statistical Area definitions and/or county
reclassifications.
The Office of Management and Budget (OMB) defines metropolitan areas for
use in federal statistical activities and updates these definitions, as
needed, each summer. Data in this release use metropolitan area criteria
established by OMB in definitions issued June 30, 1999, (OMB Bulletin No.
99-04). These definitions reflect information obtained from the 1990
Decennial Census and the 1998 U.S. Census Bureau population estimate.
Metropolitan Statistical Area definitions are typically redefined on a
yearly basis. A complete list of metropolitan area definitions is avail-
able from the National Technical Information Service (NTIS), Document Sales,
5205 Port Royal Road, Springfield, Va. 22161, telephone 1-800-553-6847.
Generally speaking, a Metropolitan Statistical Area (MSA) is a free-
standing urban area that meets a specified size criteria. Primary Metro-
politan Statistical Areas (PMSAs) are freestanding areas within very large
MSAs. Once an area is identified as a PMSA, the term MSA no longer is used
to describe the area. The large metropolitan area that is the sum of the
PMSAs is called a Consolidated Metropolitan Statistical Area (CMSA). The
set of areas known as MSAs, PMSAs, and CMSAs are collectively designated
and referred to as metropolitan areas. Nonmetropolitan areas include
counties which do not fall within defined metropolitan areas. Covered
employment and wage data include establishments classified as foreign
locations, out-of-state locations, and unknown locations in nonmetropolitan
areas.
Current metropolitan area definitions are based on standards published
in the Federal Register on March 30, 1990, (55 FR12154-12160). Under the
1990 standards, an area qualifies for recognition as an MSA in one of two
ways: (1) if it includes a city of at least 50,000 population, or (2) if
it includes a U.S. Census Bureau-defined urbanized area (of at least 50,000
population) and has a total metropolitan population of at least 100,000
(75,000 in New England). In addition to the county(ies) containing the
main city or urbanized area, an MSA may include additional counties that
have strong economic and social ties to the central county(ies) and meet
other specified requirements of metropolitan character. The ties are
determined chiefly by census data on commuting to work. An MSA may con-
tain more than one city of 50,000 population and may cross state lines.
An area that meets these requirements for recognition as an MSA but also
has a total population of one million or more may be recognized as a CMSA if:
(1) separate component areas can be identified within the entire area by meet-
ing specified statistical criteria, and (2) local opinion indicates there is
support for the component areas. If recognized, the component areas are
designated PMSAs, and the entire area becomes a CMSA. If no PMSAs are recog-
nized, the entire area is an MSA.
- 7 -
OMB defines metropolitan areas in terms of entire counties, except in
the six New England states where they are defined in terms of cities and
towns. New England data in this news release, however, are based on a
county concept defined by OMB as New England County Metropolitan Areas
(NECMAs) because county-level data are the most detailed available from the
Covered Employment and Wages program. NECMAs are county-based alternatives
to the city- and town-based metropolitan areas in New England. The NECMA
for an MSA or CMSA includes: (1) the county containing the first-named
city in that MSA/CMSA title (this county may include the first-named cities
of other MSAs/CMSAs), and (2) each additional county having at least half
its population in the MSA(s)/CMSA(s) whose first-named cities are in the
county identified in step 1. The NECMAs are officially defined areas that
are meant to be used by statistical programs that can not, or choose not
to, use the regular metropolitan area definitions in New England. However,
the NECMA definitions do not include official definitions that correspond
to the CMSA concept. Therefore, there are no explicit definitions that
correspond to the Boston CMSA or the New York CMSA.
Table 2 of this news release includes data for the New York CMSA that
includes the New Haven-Bridgeport-Stamford-Danbury-Waterbury, Conn. NECMA.
Table 2 also includes the Boston-Brockton-Nashua, Mass.-N.H. NECMA, as that
area serves as a NECMA for the Boston, Mass.-N.H. PMSA and the Boston-
Worchester-Lawrence, Mass.-N.H.-Me.-Conn. CMSA.
Additional statistics and other information
The 2001 news release for average annual pay by state and industry was
issued on September 24, 2002, (USDL 02-540), and employment and average
annual pay for large counties will be issued in late November 2002. An
annual bulletin, Employment and Wages, features comprehensive information
by detailed industry on establishments, employment, and wages for the
nation and all states. Employment and Wages Annual Averages, 2001 will be
available for sale in late 2002 from the BLS Publications Sales Center,
P.O. Box 2145, Chicago, Illinois 60690.
Average annual employment and pay data by state and county are avail-
able upon request from the Division of Administrative Statistics and Labor
Turnover, Bureau of Labor Statistics, U.S. Department of Labor, Washington,
DC 20212, telephone 202-691-6567 (e-mail: CEWInfo@bls.gov). Also available
from BLS is a news release of first quarter 2002 employment and wage data
at the national industry subsector level (USDL 02-591, October 16, 2002).
First quarter 2002 data at the state total level will be available on the
BLS Web site on November 22.
Information in this release will be made available to sensory-impaired
individuals upon request. Voice phone: 202-691-5200; TDD message referral
phone number: 1-800-877-8339.